In its draft report into competition in the Australian financial system, the Productivity Commission (PC) said allowing advisers to advise on some credit facilities would have numerous benefits for consumers, adding that mortgage brokers are “held to a relatively low standard”.
Speaking to ifa sister title The Adviser, Finance Brokers’ Association of Australia executive director Peter White challenged the PC’s comments, arguing that historically the financial advice industry has been more problematic than mortgage broking.
“There have been many issues reported in that space [financial advice] already though, so if you want to line up the two styles of professions [advisers and brokers] have a look at the issues in the financial planning space over the last 15 years and compare them to the broking space and the lending area,” he said.
“I know where the majority of issues sit. If that is what the [PC] is suggesting … and I don’t know if they are or not, but if that is what the PC is suggesting, then that is just ludicrous.”
However, rival association the Mortgage and Finance Association of Australia (MFAA) said the report “failed to understand the reasons why consumers engage brokers to act on their behalf” and ignored the value brokers have brought to Australia.
“Mortgage brokers offer customers the choice of a wide range of lenders and products. They work through ever-increasing complexity to place their customer at the centre of the process and match products to their specific needs,” said MFAA chief executive Mike Felton.
“Brokers offer convenience for customers by removing the administrative burden of obtaining a mortgage, whilst providing personalised advice and service over the life of the loan.”
Mr Felton added that an EY survey from 2015, conducted on behalf of the MFAA, found 92 per cent of consumers were satisfied with their broker’s performance.
“I am extremely proud of the contribution brokers make to competition for consumers, and to the Australian economy overall,” he said.
While some financial planners may have low regard for mortgage brokers, one thing they are definitely better at is political lobbying. Here is an extract from Peter White’s email to FBAA members…
“whoever in the Commission wrote this paper did not do their research when it comes to the broking sector and the contents are nothing short of garbage”. ” It is full of misinformation, poor actual research (if any), and a complete lack of understanding as to how our industry works”. “I am meeting with our (new) Small Business Minister Hon Craig Laundy next week in Canberra whereby amongst other matters, I will be strongly expressing my extreme concerns over the gross inaccuracies detailed in this report. Additionally I will be in Canberra several times over the coming weeks and months and I will use those opportunities to also address this with senior politicians and Cabinet Ministers as this style of ‘public servant’ gross misrepresentations cannot go unchallenged.”
It’s not just empty rhetoric either. This bloke has a track record for aggressively following through.
Imagine if the heads of AFA and FPA took the same approach to ASIC’s churn report rather than meekly standing by and allowing it to snowball into LIF?
FPA management needs to get aggressively on the front foot right now, in relation to FASEA forcing degree qualified advisers back to uni. They need to be more like Peter White of the FBAA, and less like the ineffective FPA of the past.
If broker were to be held to the same standards as planners, they would be exposed as an industry full of large scale churning and commission gouging. Peter White is just trying to protect their fat cow that they have been suckling off, with little or no regulation, for many years now. The time is up, to get professional or get out!
Oh please, ban the commissions now for this industry and see all the dodgy operators disappear. Every man and his dog is a broker
The industry needs cleaning up but why ban comms? Brokers would cease to exist which means that everyone now deals with the bank (broker) directly… I would see that as a negative.
For reference, I’m an FP with no broker ties so bias here.